Sales to sez unit exempted as zero rated sale and rate of tax deduction on works contractors enhanced to 5% in Punjab

Section 17 of PVAT Act, 2005 which defines export sales within the scope of section 5 of CST Act i.e export sales as zero rated sales, has been amended so as to add sub-section 2 of section 17 which provides that sale to a unit or developer in special economic zone and inter-unit transaction of goods within SEZ as also a zero rated sales. No output tax is payable on such zero rated sales.

However Input Tax Credit to the person making such section 17(2) zero rated sales will be available in relation to such sales. It means that the taxable person making such zero rated sales shall be eligible to get refund of tax paid on purchases made in relation to such zero rated sales.

It has been further provided that such sales shall be treated as zero rated sales only subject to production of a certificate as may be prescribed.

Section 17(3) further provides that sales directly made to a customer by a sez unit shall not be treated as zero rated sales and accordingly section 17(2) shall not apply.

Section 27 of PVAT Act, 2005 which deals with tax deduction from payments made to works contractors has also been amended so as to provide for enhanced rate of tax deduction @ 5% from earlier rate of 4%. The said amendments are effective from 02-11-2011.

Full notification can be downloaded herebelow:

Notification dated 2 November, 2011


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